Deputy Bank of Japan Gov. Kazumasa Iwata has proposed a three-step "dynamic targeting program" that includes the introduction of a numerical target to stem deflation.
Iwata said in a recent interview that he wants the BOJ to set a numerical price target that would lift the nation's consumer prices by between 1 percent and 2 percent per year.
In the first stage of the program, the BOJ would present a certain rate of price rises and continue injecting liquidity into financial markets to help raise the actual rate to zero or higher.
In the second stage, the BOJ and the government would make efforts to minimize gaps between the actual rates and the final target.
In the final stage, they would maintain price stability while making efforts to fix the balance sheets of the government and the BOJ that deteriorated during the fight against deflation.
Iwata called on the government and the BOJ to join hands in launching policy in a flexible manner during each stage to successfully combat deflation and achieve price stability.
It was Iwata's first interview with news organizations since assuming his post March 20, along with BOJ Gov. Toshihiko Fukui and Toshiro Muto, another deputy governor and former vice finance minister.
Iwata, 56, formerly served as director general for economic assessment and policy analysis at the Cabinet Office.
He said the purpose of the numerical price target is "to enhance the transparency of monetary policy."
Many central banks of major industrialized nations have such policy goals, he said.
The launch of such a target would erase uncertainties over the nation's monetary policy and avoid sharp fluctuations in long-term interest rates, Iwata said.
"I would very much like to realize" the adoption of a numerical price target, he said.
